CENTRAL PROVIDENT FUND CONTRIBUTIONS (Waiver of interest for late payment by employers)

Mr Chiam See Tong asked the Minister for Manpower whether he will consider waiving the interest chargeable on employers for late payment of Central Provident Fund contributions during this period of recession.

The Minister for Manpower (Dr Lee Boon Yang): Mr Speaker, Sir, currently, the CPF Board already provides employers with a grace period of 14 days after the end of the month when contributions are due. Penalty interest is charged after the grace period so that members would not lose out on the interest that is due to them had their employers been prompt in their payment. This is also to deter employers from delaying CPF payment.

Sir, employers have the obligation to pay the full amount of their employees' CPF promptly. CPF is considered as part of the employees' wages and employers should not delay CPF payment, just as they must not delay payment of wages when wages are due. Moreover, many CPF members use their CPF monies for their housing, healthcare, children's education and insurance needs. Late payment of CPF contributions would affect the employees' usage of their CPF for these on-going needs.

Mr Chiam See Tong (Potong Pasir): Sir, in these difficult times, is the Minister willing to waive the interest if the member consents to it?

Dr Lee Boon Yang: Sir, the CPF Board takes no pleasure in imposing penalty on employers who are late in their CPF payments. We are sympathetic to the employers and to companies that have cash flow difficulties, and are not able to meet the payments on time. That is why we give them a grace period of two weeks to make the adjustment. We do not impose a penalty immediately. But if we were to take Mr Chiam's suggestion, and take a very relaxed approach and say "Well, if you cannot pay, do not worry, you pay when you can", then we must look at the other side of the coin - the impact of such a policy on the CPF members could be quite tremendous. We will have to bear in mind, as I said in my main answer, CPF members depend upon timely crediting of their CPF contributions into their accounts so that they can meet their housing mortgage repayments. They may have to pay hospital bills for themselves or for their dependants. They may have to withdraw money to pay for their children's education, if they have taken out a loan against their CPF under the Education Scheme. So, if we allow employers to delay the payment and if we do not have any measures that will encourage, and, in fact, compel employers to meet their statutory obligations on time, we will end up with questions in Parliament by other Members asking why is it that the Board is not recovering or helping employees to have their CPF credited on time. And, we will have to answer those other questions instead.

So we have to have a balanced policy. Where we can, if there are really genuine reasons, the Board can consider giving some extension/grace period. But the Board cannot say it will not impose penalties or it will just overlook late payments and allow employers to get off scot-free, because if we adopt that approach then many more employers may choose not to pay their CPF on time and then we can run into hundreds of thousands of workers, CPF members, having difficulties. And who will answer to them? Certainly, Mr Chiam would not be here to answer to all these people who find that their CPF accounts are not credited on time and they have great difficulties meeting their financial obligations. So, I suggest that Mr Chiam look at the issue from both sides of the coin - from the employers, we are sympathetic, but we cannot ignore the needs and the rights of the employees.